Conventional mortgages dominating housing market

Banks are easing their mortgage lending standards.

Business software maker Ellie Mae has reported that 64 percent of all mortgage agreements closed in August were conventional loans, that is, mortgages that are not explicitly guaranteed or insured by a federal government agency. The vast majority of these loans, according to The Mortgage Reports, are instead backed by government-sponsored enterprises Fannie Mae and Freddie Mac, who purchase them from lenders and sell them as securities.

Of the remaining 36 percent, most are guaranteed by the Federal Housing Administration or the Department of Veterans Affairs. Fannie Mae and Freddie Mac only cover conforming loans, which cannot exceed a value of $417,000 for a single-family home and must meet other criteria regarding the borrower's credit history and debt-to-income ratio. Only conforming loan borrowers can apply for the Home Affordable Refinance Program if they have financial difficulties at a later date.

In the most recent Federal Reserve System quarterly survey of mortgage lenders, about one in four respondents said their organizations have eased lending standards in recent times after years of tightness following the subprime crisis. Fed chair Janet Yellen pointed out that it is still difficult for homeowners to get a mortgage if their credit history isn't pristine, but financial sector representatives are optimistic.

"It is a better picture," said Wells Fargo Securities senior economist Mark Vitner to Bloomberg. "There has been a generalized pickup in loan demand. Growth is a little stronger than it was a year ago. The economy seems to be at some sort of pivot point."

Mortgage loan software helps lenders calculate ideal lending terms and set amortization schedules to ensure timely installment payments, regardless of changes in interest rates or consumer demand.